Ex-Primary Global Exec’s Conspiracy Conviction Upheld

Jan. 8 (Bloomberg) -- Former Primary Global Research LLC
executive James Fleishman’s 2011 conviction for being part of an
insider-trading scheme to help pass confidential information on
publicly traded companies to fund managers was upheld today by a
federal appeals court in Manhattan.

Fleishman, 43, was convicted after trial in federal court
in New York of two separate conspiracy charges for what the U.S.
said was a scheme to obtain and pass along confidential
information from technology company employees who moonlighted as
consultants for Primary Global, a so-called expert-networking
firm.

The tips were passed to fund managers who paid Mountain
View, California-based Primary Global thousands of dollars for
consultation calls with company insiders, prosecutors said.
Fleishman is serving a 2 1/2-year term at the federal prison in
Florence, Colorado.

In their ruling, the appeals court rejected Fleishman’s
argument that his right to testify at trial was “impermissibly
chilled” by a government subpoena that required him to produce
all of his personal diaries if he took the stand in his own
defense.

“Given that Fleishman would have offered testimony that
would constitute a denial both of there being any conspiratorial
agreement and of his having any intent to violate the law, we
cannot conclude that Fleishman’s constitutional rights were
violated by requiring him to turn over what context suggests are
business records,” the appeals court said in the ruling.

Wiretaps Upheld

The appeals panel also upheld the government’s use of
court-authorized wiretaps that the Federal Bureau of
Investigation made during the investigation of a so-called trunk
line which Primary Global used to facilitate calls between
networking consultants and fund managers.

During the investigation the FBI was able to intercept 104
users of the telephone line and prosecutors in the Manhattan
U.S. Attorney’s office used some excerpts of the calls as
evidence they presented during the trial.

Fleishman had argued that the trial judge had erred by
improperly failing to suppress the fruits of wiretaps on the
phone lines because the government’s application for a court-authorized wiretap failed to establish that investigators had
probable cause to believe crimes were being committed on all
users of the lines and instead the government had eavesdropped
on 104 individual users, when 93 of them weren’t “target
subjects.”

Fair Trial

Fleishman had also asked for a new trial, saying that U.S.
District Judge Jed Rakoff, who presided over the trial, had
committed so many errors that together they deprived him of a
fair trial.

The appeals court rejected those arguments.

“The district court did not err in authorizing the
wiretaps,” the panel said. “The law from this circuit does not
support Fleishman’s constitutional arguments as they relate to
‘trunk lines’ and the Fourth Circuit case on which he relies
does not stand for the robust proposition he asserts. We have
considered appellants remaining arguments and, after a thorough
review of the record, find them to be without merit.”

The case was brought as part of a U.S. crackdown on
insider-trading involving expert-networking firms who matched
company insiders with fund managers willing to pay for nonpublic
information about technology companies for a fee.

The lower court case is U.S. v. Nguyen, 11-cr-32, U.S.
District Court, Southern District of New York (Manhattan) the
appeals case is U.S. v. Nguyen, 12-94, 2nd U.S. Circuit Court of
Appeals (Manhattan).